EU Proposes Tax Reforms to Break Budget Deadlock
António Costa targets large firms to secure agreement on new bloc-wide levies.
1Targeting Large Corporations
European Council President António Costa has proposed narrowing a controversial business tax to apply only to firms with annual turnovers exceeding €750 million. This shift aims to replace the unpopular CORE proposal, which previously targeted companies with revenues over €100 million. The new plan suggests a 0.05% levy instead of a fixed lump sum.
2Addressing German Opposition
The proposed changes are specifically designed to soften resistance from countries like Germany, which argued that the original CORE tax undermined competitiveness and harmed medium-sized enterprises. By raising the revenue threshold, officials hope to mitigate concerns regarding the economic impact on smaller businesses while still securing necessary funding for the European Union budget.
3Maintaining Revenue Projections
Despite these concessions, Costa’s team indicated they will not reduce the total revenue projections from last year’s original proposal. The bloc still aims to generate approximately €65 billion annually through these new levies. This strategy seeks to satisfy France’s push for new taxes while simultaneously addressing the fiscal concerns of other member states.
4Expanding Revenue Streams
To bridge the funding gap, the proposal includes increasing taxes on non-collected plastic and electronic waste by 25 cents per kilo. Diplomats also discussed raising the share of carbon import taxes flowing to the EU budget from 75% to 100%. Potential new levies on crypto firms and national spectrum auctions are also being explored.
5Phased Implementation Strategy
The negotiating team suggested phasing in taxes on tobacco products and polluting firms, specifically within the Emissions Trading System, for countries disproportionately affected by these costs. This gradual approach is intended to provide relief to member states that might otherwise face significant economic strain during the transition to these new fiscal requirements.
6Confessional Diplomacy Process
Pedro Lourtie, head of Costa’s cabinet, has been conducting bilateral meetings known as confessionals to test the waters on sensitive negotiation points. These discussions, which began last Thursday, are scheduled to continue until next Monday. The process is critical for identifying compromises before a formal budget negotiating document is released on November 21.
7Budget Cut Risks
Costa’s team signaled that overall budget cuts are likely, potentially impacting regional funding known as cohesion policy. This prospect represents a major setback for the Friends of Cohesion, an alliance of Southern and Eastern European countries. Conversely, subsidies for farmers are currently deemed less likely to face significant reductions during these ongoing negotiations.
8Urgency of Negotiations
The European Union aims to reach a comprehensive budget deal by the end of 2026. Negotiators are racing to finalize terms before upcoming elections in Poland, France, and Italy threaten to derail the process. A special summit scheduled for late November will be a pivotal moment for determining the future of these fiscal reforms.
Original article: Politico Europe — EU Proposes Tax Reforms to Break Budget Deadlock